Letter: Impact Fees Stimulate the Economy

Contrary to what some would have us believe, impact fees actually stimulate the local economy. When there is new construction, there is a need for new or higher capacity roads, more water and sewer lines, more schools, parks, and libraries as well as more fire stations, fire trucks, ambulances, police cars, school buses and other infrastructure that is required only because of the new construction.

The State of Florida passed the Impact Fee Act in 1986 to help local communities raise funds to build or purchase the massive amount of infrastructure that is required because of new construction. The rules for charging impact fees are very specific. They require a recent study based on local data. The funds generated may only be used to support the new construction.

When developers pay impact fees, that money is spent to produce the infrastructure that is required to support new development. After all, would anyone want to buy a house that wasn’t connected to water or sewer lines or didn’t have roads leading up to it? What if there were no schools, or police, fire, and emergency vehicles that serviced their neighborhood? When people buy a new house they expect all those things, and they shouldn’t expect people who already live in established neighborhoods to pay for that new infrastructure.

Developers pay the impact fees but pass that cost on to the new buyers. That cost becomes part of the buyer’s investment; part of the "cost basis“ of their house and that cost is included when the house is eventually sold by the original owner. If you are the second owner, part of your cost compensates the original owner for what he paid to the developer for impact fees.

So, how do impact fees stimulate the economy? Well, when impact fee revenue is spent for new infrastructure, jobs are created to install pipelines or build new roads or schools and other infrastructure that is required because of the new development.

If developers are not required to pay 100 percent of the recommended impact fee, who pays the difference? Sometimes some of the infrastructure isn’t built right away. That hurts the economy because fewer jobs are created. But, there is a certain amount of infrastructure that must be built to support the new construction. You can’t just stop building a road a mile away from a new development because there isn’t enough impact fee revenue.

Communities have to raise that money somehow and that usually means selling bonds. In that case, the burden of payment shifts from the new homeowner to the taxpayers who have to pay back the bonds plus interest. That takes money out of the taxpayer’s pockets which means they have less to spend locally. That hurts the economy.

And, that infrastructure that wasn’t built will eventually have to be constructed. For example, suppose there isn’t enough impact fee revenue and a turn lane into a new subdivision isn’t built. That might save a hundred thousand dollars initially. But, five or ten years later, when the subdivision is fully built out, there are a lot more vehicles trying to enter the development so now the turn lane has to be built. Who pays for it now? No more impact fees are being collected so the community has to pay. And now it costs more because the curb has to be torn out and the sidewalk has to be relocated and maybe street lights need to be moved plus inflation alone will cause an increase in cost. Is that fair? Of course not and it hurts the economy.

When local economies discount or altogether suspend collection of impact fees there is a negative impact on the economy. There is no evidence that suspending the collection of school impact fees in any way improved the economy here in Manatee County.

The recent TischlerBise school impact fee study indicated that six new schools will be needed soon but, there are no funds available because school impact fees have not been collected for seven years.